2018 (8) TMI 1435 - HC - Income Tax

Reopening of assessment beyond 4 years u/s 147 - computation of Capital Gain - sale of four agricultural lands - revenue contended that, assessee had no agriculture land for more than two years before transfer and there was no evidence that the land was put to agriculture use in the last two years before sale. - Held that - The Assessing Officer examined the transactions and the petitioner s claim during the assessment proceedings. As noted multiple queries were raised. All such queries were answered. Documents called for were supplied. It was only after thorough investigation that the Assessing Officer passed order of assessment. Additionally, we also notice that in the context of notice of reopening which is issued beyond the period of four years from the end of relevant assessment year, there is nothing on record to suggest that there was any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. Thus an essential pre condition to enable the Assessing Officer to issue notice of reopening is not satisfied. - Decided in favor of assessee.

Summary

Issues Involved:
1. Legality of the notice issued for reopening the assessment beyond four years.
2. Alleged failure of the petitioner to disclose material facts.
3. Examination of the petitioner's claim under Section 54B during the original assessment.
4. Whether the reopening amounts to a change of opinion by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued for Reopening the Assessment Beyond Four Years:
The petitioner challenged the notice dated 6.9.2017 issued by the respondent – Assessing Officer to reopen the petitioner’s assessment for the assessment year 2012-13. The notice was issued beyond the period of four years from the end of the relevant assessment year. The petitioner argued that in the absence of any failure on their part to disclose truly and fully all material facts, such notice could not have been issued. The court noted that the reopening notice was based on the Assessing Officer’s belief that the assessee had claimed an unsustainable deduction under Section 54B of the Act.

2. Alleged Failure of the Petitioner to Disclose Material Facts:
The respondent contended that the petitioner failed to disclose that the agricultural land was not held for more than two years before the transfer and there was no evidence of agricultural use in the last two years before the sale. The court found that during the original assessment, the Assessing Officer had examined the petitioner’s claims in detail, including the deduction under Section 54B. Multiple queries were raised and duly replied to by the petitioner, and all necessary documents were supplied. Therefore, there was no failure on the petitioner’s part to disclose material facts.

3. Examination of the Petitioner’s Claim Under Section 54B During the Original Assessment:
The court observed that during the original assessment, the Assessing Officer had scrutinized the petitioner’s claim under Section 54B extensively. The petitioner provided full details of properties, evidences of sale and purchase, and the working of short-term capital gain. The Assessing Officer had raised multiple queries, including the applicability of Section 50C of the Act, and all were answered satisfactorily by the petitioner. The court concluded that the Assessing Officer had already formed an opinion on the petitioner’s claims during the original assessment.

4. Whether the Reopening Amounts to a Change of Opinion by the Assessing Officer:
The court referred to the case of Gujarat Power Corporation Ltd. vs. Assistant Commissioner of Income Tax, which held that an assessment previously framed cannot be reopened on a mere change of opinion. The court emphasized that the powers under Section 147 of the Act are special and peculiar, intended to protect the revenue’s interest but also to avoid undue hardship to the assessee. The court found that the Assessing Officer had already formed an opinion on the petitioner’s claims during the original assessment, and reopening the assessment would amount to a change of opinion, which is not permissible.

Conclusion:
The court concluded that the reopening notice issued beyond four years was not justified as there was no failure on the petitioner’s part to disclose material facts. The Assessing Officer had already examined the petitioner’s claims in detail during the original assessment, and reopening the assessment would amount to a change of opinion. Therefore, the impugned notice was set aside, and the petition was allowed and disposed of.